CSR. The C is for Complex by Russo

CSR. The C is for Complex

A FAREWELL TO THE SIMPLISTIC RESEARCH ON THE LINK BETWEEN CSR AND FINANCIAL PERFORMANCE. A PAPER BY PERRINI, RUSSO, TENCATI AND VURRO NOW DISENTANGLES THE RELATIONSHIP AND EXPLORES NEW ROUTES

More than thirty years of scientific quest for the relationship between corporate social responsibility and financial performance gave mixed results. “The business case for social responsibility and the related link between corporate social performance and corporate financial performance remain the most controversial areas in the business-in-society field”, Francesco Perrini, Angelo Russo, Antonio Tencati and Clodia Vurro write in Going Beyond a Long-lasting Debate: What is Behind the Relationship between Corporate Social and Financial Performance?, a paper contributed to the EABIS Research Project on Sustainable Value.

If we want to make some progress, we need “a more detailed understanding of the mechanisms linking certain activities to certain performance outcomes”, the authors say, and they find this understanding “adopting the practitioner point of view”, which considers CSR as a strategy for dealing with stakeholders. “If CSR is considered as a new governance model based on the crucial value of stakeholder relationships and on the capacity of a firm to meet stakeholder needs beyond mere legal compliance, then a clear understanding of CSR performance consequences should disentangle different management areas and investigate how specific activities translate into organizational, managerial or market gains according to a multiple-bottom-line thinking”. It’s what has been called the Value Creation Framework.

The core of the paper, first, singles out CSR-related drivers which have a positive influence on organization, customers, society, natural environment, innovation and governance and then details the relationship between these effects and financial outcomes. The figure below summarizes the results.

The Network for Business Sustainability, a researchers’ shop, selected the paper as one of the most important in the field, including it in their Research Insights newsletter, aimed at making academic knowledge accessible to a broader audience.

The value creation framework

Source: Sustainable Value EABIS Research Project. 2009. Corporate Responsibility, Market Valuation and Measuring the Financial and Non-Financial Performance of the Firm. Final Report, http://www.investorvalue.org/docs/EabisProjectFinal.pdf